UPDATE 2-Qatar Tel ups stake in Kuwait Wataniya in $1.8 bln deal

* Qtel raises stake to 92.1 pct from 52.5 pct

* Deal gives Qtel more control over Algeria, Tunisiasubsidiaries

* Wataniya unlikely to delist from Kuwait bourse * Qtel cannot force remaining shareholders to sell

(Recasts, adds analysts quotes, details)

By Matt Smith and Dinesh Nair

DUBAI, Oct 7 (Reuters) - Qatar Telecom (Qtel) hasnearly doubled its stake in Kuwait's No.2 operator Wataniya

to 92.1 percent, giving an instant boost to its bottomline and more control of subsidiaries in the high growth marketsof Algeria and Tunisia.

Qtel, which operates in 16 countries across the Middle East,Africa and Asia, will pay 519.1 million Kuwaiti dinars ($1.8billion) at 2.6 dinars per share to raise its stake in Wataniyafrom 52.5 percent, it said in a statement on Sunday.

"For the past couple of years the geopolitical situation inthe Middle East has made it riskier to buy into new assets, soQtel has prioritised raising its stakes in existing units whereit knows the market and the other shareholders," said MarcHammoud, Deutsche Bank telecoms analyst, in Dubai.

Qtel consolidates Wataniya's net profit on a pro rata basis.In 2011, the firm made a net profit of 362 million dinars fromits operations in Kuwait, Algeria, Tunisia, the Maldives, SaudiArabia and the Palestinian Territories.

Wataniya owns 71 percent of Algeria's Nedjma and 75 percentof Tunisia's Tunisiana, with this pair's revenue up 33 and 116percent respectively last year, according to Qtel's results.

Yet Kuwait accounted for about 90 percent of Wataniya's netprofit last year, with the country's average revenue per user(ARPU) among the highest in the Gulf.

"Tariffs aren't expected to decline substantially and thiswas an opportunity for Qtel to up its stake in a cash cow," saidAbhinav Purohit, an analyst at IDC in Dubai.

Wataniya has an estimated 39 percent share of Kuwait'smobile subscribers, with Zain claiming 41 percent andSaudi Telecom Co's (STC) affiliate, Viva, 20 percent.

"For many years, Wataniya did very well against Zain, butthe market has changed since the launch of Viva, which has STC'sbacking and thus has been quite aggressive," said Abhinav. "Thiswill allow Qtel to better deal with competition and also give itmore lobbying power in Kuwait."

The latter is important because Kuwait does not have atelecom regulator. The Ministry of Communications is a de factowatchdog and also ultimately owns and operates the fixed-lineinfrastructure, which has long been earmarked for privatisation.

"Qtel will be better placed as new opportunities emerge inKuwait, especially in fixed lines," said Purohit.

Qtel did not state whom it bought the Wataniya shares, buton Saturday sources told Reuters the Kuwait Investment Authority(KIA) had agreed to sell its 23.5 percent stake.

Deutsche's Hammoud said the KIA's decision to sell itsentire holding in Wataniya could set a precedent, with thegovernment also owning stakes in Zain and Viva.

Bourse rules do not allow Qtel to force remainingshareholders to sell.

"There are no delisting plans and Qtel won't go tominorities with a better offer to buy them out," said a bankingsource familiar with the matter. "For Qtel, a 90-percent controlis more than enough."

The Wataniya deal is Qtel's second major buy this year afteragreeing in June to double its stake in Iraq's No. 2 operatorAsiacell to 60 percent for $1.47 billion.

"Are we going to see more majority shareholders looking tobuy-out minority stakeholders in the sector? My answer would beyes," added the banker.

Yet Qtel is unlikely to take full control of Tunisiana,despite the government set to offload its remaining 25 percentstake, because it wants to sell to a financial investor, ratherthan a telecom firm.

Qtel was advised by Barclays Capital and theinvestment banking arm of National Bank of Kuwait onthe deal. Consulting firm Protiviti advised Wataniya.

(Writing by Matt Smith; Editing by Sanjeev Miglani)


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